Pennsylvania Record

Wednesday, April 1, 2020

Third Circuit rules Philadelphia's Wage Equity Law, meant to close pay gaps, is valid

Federal Court

By Nicholas Malfitano | Feb 10, 2020

Philadelphia
Philadelphia

PHILADELPHIA – A three-year-long fight over a wage equity law ended with a victory for those looking to end wage gaps, as the U.S. Court of Appeals for the Third Circuit ruled Thursday that a Philadelphia law forbidding employers from asking potential employees about their salary history is constitutional.

The Third Circuit ruling partially reversed an earlier one from the U.S. District Court for the Eastern District of Pennsylvania, which struck down the part of the law prohibiting employers from asking questions about salary history on the grounds that it violated the First Amendment.

However, the Third Circuit did agree that employers can’t look to set wages by using a person’s salary history as a guideline.

The regulation was intended to bridge the gender and race gaps in wages between white males and both women and people of color. The Philadelphia City Council justified the move by referring to studies that said women make 80 cents for every dollar a man makes doing the exact same job.

The ordinance was unanimously passed by the City Council in January 2017 and signed into law by Mayor Jim Kenney that same month.

Employers found to violate the measure would be subject to punitive measures from the Philadelphia Commission on Human Relations, including cease and desist orders, injunctive or equitable relief, compensatory damages and attorney fees, and punitive damages of up to $2,000 per violation.

The Chamber of Commerce for Greater Philadelphia challenged the measure soon after, filing a lawsuit in the U.S. District Court for the Eastern District of Pennsylvania in April 2017, which asserted that the law inhibits employers’ free speech rights under the First Amendment to the U.S. Constitution.

In April 2018, U.S. District Court Judge Mitchell S. Goldberg found in favor of the Chamber, granting a preliminary injunction that the ordinance violated the First Amendment rights of employers and decided that the City of Philadelphia did not meet the burden of proof required to show the law would be effective.

Yet, the District Court did concur with the ordinance’s provision that prohibited employers from relying on or using salary history information when making salary offers.

Both the City and the Chamber appealed the decision to the Third Circuit, where a three-judge panel comprised of Theodore A. McKee, Jane R. Roth and Julio M. Fuentes ruled on the case Thursday in a 67-page opinion, authored by McKee.

McKee explained that the City provided “a plethora” of evidence justifying the presence of gender and race-based wage gaps, and therefore, the existence of the law.

“We believe the court’s analysis of that provision applied a much higher standard than required. The Supreme Court has not demanded that the enacting authority achieve legislative certainty or produce empirical proof that the adopted legislation would achieve the stated interest even when applying strict scrutiny,” McKee said.

“Rather, the appropriate inquiry requires courts to determine whether the legislature ‘has drawn reasonable inferences based on substantial evidence.’ In short, the Supreme Court has upheld similar restrictions based on much less evidence than the City presented here.”

Kenney issued a statement offering praise for the Third Circuit’s ruling.

“I am pleased that the court saw this our way. We enacted this law to help close the wage gap that unfairly affects women and people of color in Philadelphia,” Kenney said.

“If employers were to keep asking job applicants for salary history, they would simply perpetuate the wage gap. Taking steps to ensure that women and people of color are paid the same as their white male counterparts will have significant social and economic benefits. It is, quite simply, the right thing to do.”

City Solicitor Marcel S. Pratt also applauded the Court’s decision.

“This is a significant victory not just for Philadelphia, but also for the national equal pay movement. Jurisdictions across the country subsequently passed similar legislation and have been closely watching and supporting Philadelphia’s case. There is overwhelming evidence showing that the wage gap for women and people of color cannot be completely explained by legitimate factors,” Pratt said.

“Decades of comprehensive studies prove that past discrimination taints the salary histories of women and people of color. The notion that the Wage Equity Ordinance will help close the wage gap is not only supported by significant empirical evidence, it is also backed by plain common sense. With this ruling, the Third Circuit agreed that the City made a well-reasoned judgment based on a ‘plethora of evidence’ that banning wage history inquiries would prevent the further perpetuation of gender and race discrimination in wages. I am thankful to the Court for its careful consideration and thorough analysis.”

The Chamber did not respond to a request for comment from the Pennsylvania Record.

Similar laws aimed at closing wage gaps have also been enacted by New York City and the states of New Jersey and Massachusetts.

The PCHR is due to announce its plans for the law’s enforcement in the near future.

U.S. Court of Appeals for the Third Circuit cases 18-2175 & 18-2716

U.S. District Court for the Eastern District of Pennsylvania case 2:17-cv-01548

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com

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The Greater Philadelphia Chamber of Commerce